Everything from the rise in telehealth trends to the COVID-19 pandemic has increased remote work within the healthcare sector. As companies face shortages and risks from face-to-face encounters, it’s likely that the remote workforce will only continue to grow within healthcare.
However, if your healthcare organization offers equity compensation, such as stock options or restricted stock, remote work could cause substantial tax implications. Healthcare leaders who spot and avoid these potential mobile equity challenges now could prevent tax violations, regulatory penalties, and talent shortages down the road.
Here’s what’s driving this uptick in tax risks and what you can do about it.
The remote workforce is surging within healthcare.
Equity compensation has long been a popular incentive within healthcare. However, what’s new is the recent surge in remote workers who receive this type of compensation. According to McKinsey & Company, telehealth use for office visits and outpatient care jumped to 78 times higher in April 2020 than in February 2020.
Of course, much of that online traffic arose out of the COVID-19 pandemic. However, even though the same study found telehealth use has since settled from pandemic highs, in July 2021, it was still sitting at a level 38 times higher than pre-COVID-19 figures.
What’s more, going forward, there are incentives for both healthcare employers and employees to increase telehealth and remote options. So far, remote work has proven to be an extremely popular perk. In fact, a 2021 Statista survey found that 80 percent of remote workers would recommend remote work to a friend. That could make popular remote positions attractive to companies within a healthcare industry that’s struggling to fill labor shortages.
Overall, it’s likely that remote work will only continue to grow within the healthcare industry. Unfortunately, for companies that reward employees with equity compensation, the upswing in remote work could cause major tax complications.
Remote work increases global equity tax risk.
In many cases, healthcare companies created remote work options during the COVID-19 pandemic in a rush. Unfortunately, that means employees may be scattered across state and international borders, with employers unsure about their exact whereabouts. If those employees are receiving equity compensation, it opens the entire organization up to several potential risks.
Here are three common mobile equity challenges that spring out of untethered remote work:
1. Tax Violations
The earning period for equity compensation tends to spread across a significant time period. That can cause tax complications because some regulators may determine the employee is receiving compensation between the initial granting and vesting periods—a time frame that often includes several years. If an employee is working across state or international borders during that period, they may be creating withholding requirements in additional jurisdictions that the payroll and stock administration teams aren’t aware of. As a result, remote employees could create payroll withholding violations for the employer, potentially face double taxation, or draw extra unwanted attention from regulators.
2. Unexpected Reporting Obligations
When employees are hopping from country to country or state to state as they work, it’s possible that their reporting obligations could shift with every new destination they work within. And that can spark tax complications both domestically and internationally. For instance, even if a remote employee is traveling to a neighboring state to stay with family as they work, they may trigger additional tax or reporting obligations for multiple states. Simply trying to figure out tax obligations on their own can frustrate employees, and these complex scenarios could result in hefty tax penalties for healthcare companies.
3. Diminished Compensation
Since different jurisdictions enforce different social security, withholding, and tax laws, remote employees may face tax implications that diminish the value of their original equity compensation package. If they’re paying significantly higher tax on their compensation than they originally planned, they may feel undercompensated and undervalued. That can lead to frustrated employees and an even more severe talent shortage in the healthcare industry.
How can healthcare overcome mobile equity compensation challenges?
Healthcare leaders can avoid these equity compensation issues by being proactive. Here’s how to prevent mobile equity consequences for remote healthcare employees:
- Create clear remote work policies. The first step in avoiding mobile equity mishaps is creating clear policies for remote work. Your organization’s policy should fit your company’s specific needs, but it should include guidelines mapping out where employees can and cannot work. It’s also important that your remote work policies are centralized. Otherwise, departments may end up creating their own rules and creating even more complications.
- Build out multidepartment processes. You can also plan to overcome tax and compliance issues by mapping out clear processes. However, managing remote employees may require expertise from immigration, corporate tax, payroll, and more. That’s why it’s important to bring leaders and specialists in from across the organization—as well as additional vendors—to carve out processes that preemptively stop tax violations.
- Embrace administrative technology. Most healthcare companies are short-staffed as it is. And managing remote employees and their tax needs could require heavy administrative lifting. That’s why it’s wise to use technology to fill any resource gaps within your organization. Whether it’s to automate remote work processes, monitor tax rules, track employees, or accomplish another labor-heavy task, technology may be able to help ease labor burdens.
Planning now can save healthcare organizations in the future.
In the future, telehealth services and remote work will likely continue to grow. That means healthcare leaders that create mobility plans now could prevent tax penalties, reputational damage, audits, and tax frustrations in the future. By adopting a proactive stance, it’s possible to embrace remote work trends and offer equity compensation while avoiding those tax pitfalls that are growing on the horizon.
Christopher Hall joined GTN in 2009 and serves as managing director. He has more than 25 years of expatriate tax experience. His analytical approach to data and straightforward manner is reflected in how he handles each unique tax or program issue: logically and rigorously until he finds the right answer.